Google and the Internet Industry
Over the years, the internet information industry has grown more competitive and turned into a multi-billion industry. The simplicity of the industry is considered revolutionary in communication. The provision of quick and reliable information turned into a product that generates profits is exceptional by all standards. Google is among the many companies that have used this idea for their profit. So many large companies have over the year’s closed shop or sold the enterprise. However, Google keeps beating all the odds and performing better than the expectations. The company has been able to accomplish their goals. The paper looks at the company/ industry overview, current market conditions and economic forecasts to present a recommendation for the airline industry as a whole as well as for Google (Vise, 2007).
The idea of selling the services of information provision over the years has become very lucrative. The market nitch, in this case, was the provision of reliable and quick information. With the internet as the common factor, the services of reliability became the number one need for all their customers (Al-Eroud et al., 2011). What the market needed was the idea of safety. The potential to stimulate demand using low fares joint with the high level of dissatisfaction among the internet users provides Google with an excellent opportunity. The start of the company was to ensure that customers get to have all that they need about reliability to getting information (Tang et al., 2006).
History of Google
The idea behind the start of Google was the provision of free information through the use of the internet. According to Russolillo, (2014) the success of the company is based on one particular step of the value chain; the provision of accurate data for free. The competitive advantage is due to so many different aspects that the company seems to embrace. They include cost leadership strategy, differentiation strategy, and focus differentiation. These make up some of the reasons behind the success that the company has boosted for more than a decade. In the year 2009 the company attained a turnover of 21795 billion USD. All this mostly based on the companies connected dominant position in online advertising. In 2015, the company has a market cap of 531.60 billion, P/E of 32.32, ROE % of 14.36 making the business’s profitability margin at a proper place (Russolillo, 2014). Within this same period, the company compares favorably with other firms. The price changes for the enterprise compared to Yahoo and Facebook shows the kind of superiority that Google has in the market. The prices are 34.91 and 106.18 respectively. The changes are +0.57 and +1.80 compared to Googles +11.01. The market cap of the same companies is 32.97 billion and 300.28 billion all trailing behind Google. Since 2004 when the company went public the rise of its stock has been increasing. According to Russolillo, (2014) the stock grew by 1294% within a decade period (Russolillo, 2014). The companies annualized return over the decade beat the 6.1% annualized gain of the S&P by roughly 500 times. The company’s transformation has exceeded the expectations of the founders. Transforming itself into the profitable company that it is currently. The company is projected to keep improving considering the advantages that they have in the market and also their current performance (Gandal, 2001).
Role of government regulations
Internet industry over the years has been on the receiving end of so many people who are calling for government regulations to get implemented. President Obama in a speech in 2014 asked the FCC to implement rules and regulations that would see the protection of the open internet. Cases of fraud and hacking attacks are a common thing in this generation and time. So many people have also talked about morals and cultural decay getting linked to the availability of too much information or full information. Growth in Google and all the other companies in the industry have to deal with these issue (Haucap et al., 2014). In China, the industry is already feeling the effects of the government regulations getting implemented. The freedom that the asset, in this case, the internet operated with now gets limited. The role of government is always to put the interests of the public before the cooperation. It is with this type of thinking that the directive by President Obama concerning the FCC regulations on the internet originated (Nishimura et al., 2002). The confusion of whether the same standards exist in similarity with another communication outlet has also gotten clarified. Restrictions on the media can never be applied to the internet use. While the concerns get raised regarding regulation, it is apparent that government has a role to play in the regulation of the corporations in the internet industry. Google like any other internet company has to oblige with this rules that are currently being affected across the globe with primary targets being the curbing of the treats that information dispensation brings into the country (Jarvis, 2011).
Issues Google faces
Google can best be described as one of the most successful franchises in the world. Roughly within the 15 years the company has been able to create a very competitive product with the single greatest product search. However like most businesses there are certain threats that the company faces within a span of ten years. The first concern would be the social media concerns. The idea of people using the internet for interaction possesses a threat to this big business. Facebook and Twitter are taking most of the clients to rely on the services that they offer. In a few year regardless of the attempts that Google is making with Google plus the likelihood of it being faced out presents that possibility (Murray et al., 2012). Social networks offer a significant challenge for this company with it getting ranked at a position considered irrelevant as far as competition is concerned.
Opportunities Google faces
The mobile advertisement opened up the market for Google and their search dominance. As a company, the move presented them with a general market structure. The opportunities that they could tap into were so many. Currently, the business is trying its hand on the social media platform and also the provision of smartphone applications. The diversity of the market offers the business so many options. Currently, Facebook enjoys a 22 billion lead in social networking returns in the US economy followed by Twitter, and yet Google falls in the category of others (Murray et al., 2012). It is a market nitch that the company has not yet fully exploited. The company tried its hand in the technological advancement and then paused. In as much as it bore no fruits, it’s also a very broad market that can still be exploited fully by the company (Jarvis, 2011).
The word that best describes this type of market is an oligopoly. According to Mazzeo, (2002) this form of market structure has the following characteristics;
- Relatively small number of firms exist in this company.
- Each company takes into consideration their competitors reactions
- The existing enterprises are mutually interdependent and can be collusive or non-collusive.
Most of the companies in the United States can be classified as an oligopoly. Most of the businessmen’s response to the question of whether they consider the responses of a rival company in all cases the answer is yes. The market in which Google operates is a vast and extensive market. Google works mainly in internet search protocols. In the internet industry, there is that need to put into consideration the prices changing so as to adjust appropriately. Considering that the rates in this industry are more or less the same the companies the lay in wait for a leading company say Google to change its price, and they follow the same trend. For the most part, all internet companies charges the same rates. Most of the enterprises in the Internet industry are collusive when it comes to this very concept. According to Mazzeo, (2002) the behavior that has been described is against the law. Most of the companies that does this form of collusion can best be described as going against the law. In most cases, they do not meet to agreed price strategy. For this industry what is considered as legal is a fine line between legality and criminal activity.
Impact of entry of new companies
The entry into this market become desperate. The first reason would be the starting capital that for most of the firms is very high. The level of completion in this type of market makes it very hard for new entries. Legislation especially the licensing process makes the idea of entering into this market impossible. Most firms get threatened by the profitability that some of the multi-billion companies have to net at the end of the year. Analyzing the same situation using the Porters five forces. It is apparent that the positioning of the firms is the reason behind the barrier to new entries in the internet industry (Al-Eroud et al., 2011).
Google cost effective AdWords product is among the most popular products of the company. The product is set such that the clients get to understand the system and the awarding of the users is based on the rewards business who have high quality ad campaigns. That marks the pricing system. For small ads the costs range from $1 to $2 through the search network. However for small business the company would be charging within a range of $9000 and $10000 per month (Russolillo, 2014). Making the total payments range from $100000 to $120000 on an annual basis. This however does not put the company in the mention list. Facebook operates the biggest social network in the industry. The internet for them has enabled the company sell social connections at a profit. That said they boost of roughly 1 billion registered users and the costs are as manageable with performances of their products in ads ranging between 0.04% to 0.03% impacts on their total net earnings. Their costs like Google are within the same range from $1 to $2 (Tang et al., 2006). However their charges within a year differ a bit from Google with the company boosting of a higher return. Twitter is the second most competitive ad seller due to its social network numbers. The interesting fact however is that their product sales range within the same averages as the other two companies.
Google is a corporation that prides itself in the employee workforce being its source of success. According to Haucap et al., (2014) the company can well be ranked as one of the most formidable companies that reward employees efficiently and are successful in doing that. According to Haucap et al., (2014) to get to such a performance standing the company ought to have reinvented the term human resources. The company has well over 50000 employees cutting across the whole world. The rewards that some of this employees enjoy range from the excess pampering that they receive while still being able to extract the outstanding ideas from them. To bring the picture home their philosophy of work talks of creation of the most productive workplace in the world. With this in mind then employees seem to meet every set stands of what happiness means. The company invests in employee satisfaction and growth and the results are seen through their stock performance (Haucap et al., 2014).
Google operates with a value-driven cost structure. The biggest expense at Google is the research and development of the business. The idea behind their operation is to always stay on top of the technology game. The company is also known for purchasing small promising firms that help it in the fulfillment of their value driven cost structure. The company’s research and development expenses have been placed at $2.8 billion, $2.8 billion, and $3.8 billion in the years 2008, 2009, and 2010 (Vise, 2007). Other companies that operate within this industry present a similar structure however they base mostly of different directives. For Facebook the three biggest costs or expenses would be the server, storage system, and office and datacenter rent payments. From this analysis it seems that Google bases most of its expenses on current costs yet Facebook looks mostly at the fixed costs. However what is apparent is that all these firms have one thing in common they all spend on acquiring an asset.
Google cuts across all the technological companies as its main competitors. However over the years the most dominant competitor has always been Yahoo and Microsoft. The performance has however not presented the other company in the best of light since Google keeps a stride distance when it comes to their logarithm in the search industry. Its completion with Yahoo has been ongoing for a longer time. The completion with Facebook has however been not gone on for a long time. The advertisement section seem to present peg it with this multibillion company (Vise, 2007).
Supply and demand
The company is considered one of the best advertising internet companies. With the launch of the glass ware product, the request of the product was created before the product hit the shelves. The idea was not to relay on the marketing firms to do the market breaking but they rather went straight to social media interactions. According to the marketing director roughly 1% of the sales were as a result of marketing media outlets but 92% of these sales were as a consequence of the use of social media. The idea was to create a massive demand structure before the sales began. The company managed to break the norms in the supply and demand tactic by creating the “I want to have just that” kind of mentality before launching the product to the market. Such is the marketing strategy of the company. Pushing their ideas and approaches to the limit so as to gain sales in the long run (Vise, 2007).
The market in which the company operates in is a very competitive outlet. For a business to make it like Google has done then it requires some kind of disciple that is exceptional. The paper looks to explore some of the forecasts that would likely affect the business. The paper examines the pricing, productivity, entry of new firms into the market, completion, and demand and supply of the company.
From the analysis above it is clear that the company is dependent on the pricing of individual lead enterprises in a given venture. Take the case of advertising the products being offered are the same. The market coverage and the branding presents the difference in terms of profitability. The pricing of products is done with so much care so that no one losses at the end of the financial year. Customers are many and the reach of the company makes its approach to getting customers even more vast. Diversity is all that the company needs to watch out for since the business is keeping the clients as interested in the enterprise more and more.
Cutting the barrier of completion is dependent on how the firm adopts to the challenge of being productive. For the case of Google the idea is the investment in the right minds, motivation of employees and also purchasing of other firms that help it attaining its cost budgeting. Like most oligopoly firms the idea becomes more of branding their products in a way that is more attractive than the next door company. The idea has well been presented in a way that will make the organization exceptional in every way.
Cutting down on expenses is what most of the firms in this industry strive for in every financial year. The idea becomes investing in product and also ensuring that the costs are kept to a minimal so as to ensure that the firm gains in the end. The structure of the company concerning the value has been such that they incur expenses that they can tolerate in the long run.
Price elasticity of demand
The idea of breaking ground with a new product in this market requires some form of exceptional traits. The idea presented here would be that firms need to come up with a way of attracting clients to their products when it finally gets to the shelves. Google establishes its self as powerhouse in terms of cutting the ropes regarding demand creation and supply increase. The thinking outside the box of the marketing department makes them exceptional in every way. In this market introduction of a new product has to be given that cutting edge propelling to ensure it meets the breakeven goal or even record some form of profitability.
For the Google company to stay relevant in the coming years they need to reconsider their areas of investment. The social media is a booming business and their efforts with regard to tapping this area of the market need to be improved. The company also needs to consider their advertisement segment as a product. Rebranding has been done on it several times. What they need to come up with would be to look deeply at what stands out and ensure that the product is franchised to make it better and more appealing to the clients. Considering the pricing and the cost structure the firm is operational within the recommended levels. Google over the years has been one of the most successful internet companies in the world. However the need to expand and to touch on so many different products makes the whole process maintaining productivity a reality. Among the challenges that the company faces would include a tap in the social media section. It also has to deal with the reality of an increase in the completion. The strengthening of the companies operational and cash strategy use becomes even more important in this case. Being a business the need to always be profitable will be as a result of the strengthening of all the aspects touched on in the paper. The need to consider the pricing of their products is the first aspect that ought to be considered. The next need would involve the strengthening the demand and supply levels in the company. Through this process Google will be a company worth mentioning in the future.